XBRL and Accruals: Empirical Evidence from China

We examine whether XBRL adoption by publicly traded firms on the Shanghai Stock Exchange and Shenzhen Stock Exchange is related to the level of total accruals that firms report in the pre-XBRL versus post-XBRL periods. Our results indicate that the level of total accruals in the post-XBRL period is lower relative to the pre-XBRL period. This finding is robust to several controls for macroeconomic conditions and firm fundamentals. Moreover, we find this main effect is most prominent for firms that are most likely to benefit from greater transparency: high-growth firms, small firms, and firms in high-technology industries. One interpretation of our results is that XBRL implementation decreases investor's information acquisition costs and thereby improves their ability to detect earnings management; managers in turn reduce accruals.